All Episodes

January 27, 2026 13 mins

In part one of this week’s series, Ed Zitron explains how the AI bubble could be so much worse than the dot com bubble - and how people are too flippant about the carnage caused by the 2000s telecommunications bubble bursting.

Please support me by subscribing to my premium newsletter - here’s $10 off your first year of annual https://edzitronswheresyouredatghostio.outpost.pub/public/promo-subscription/84rt762qen - it features an in-depth version of my dot com bubble analysis here: https://www.wheresyoured.at/dot-com-bubble/

YOU CAN NOW BUY BETTER OFFLINE MERCH! Go to https://cottonbureau.com/people/better-offline and use code FREE99 for free shipping on orders of $99 or more.

---

LINKS: https://www.tinyurl.com/betterofflinelinks

Newsletter: https://www.wheresyoured.at/

Reddit: https://www.reddit.com/r/BetterOffline/ 

Discord: chat.wheresyoured.at

Ed's Socials:

https://twitter.com/edzitron

https://www.instagram.com/edzitron

https://bsky.app/profile/edzitron.com

https://www.threads.net/@edzitron

Email Me: ez@betteroffline.com

See omnystudio.com/listener for privacy information.

Mark as Played
Transcript

Episode Transcript

Available transcripts are automatically generated. Complete accuracy is not guaranteed.
Speaker 1 (00:03):
Media.

Speaker 2 (00:04):
Hi, I'm d Zeitron and this is Better Offline.

Speaker 1 (00:19):
Welcome to dot Comweek.

Speaker 3 (00:21):
I hope you enjoyed my chat with Matt Rosof to
kick it off, and today is the first of a
four part special But why I think the AI bubble
is that much worse than the dot com bubble. So
for almost five years I put out a newsletter or
article basically every week that addresses the underlying financial rat
at the heart of the tech industry, whether it be
the outright corruption the crypto industry, the bullshit of the metaverse,

(00:43):
or the AI bubble that I won't shut up about.
It's been some of the most challenging work I've ever done.
I've been forced to learn accountancy, economics and the names
of at least ten different guys i'd gladly see under
a with a I'm not on accountant, forensic, or otherwise.
I'm not a banker or a financial analyst. I've never
worked as a venture capitalist or a hedge fund, or

(01:04):
at a hedge fund. I guess that would be I'm
just a guy with a laptop and a microphone. But
I think I've picked up a great deal of knowledge
in the last few years, and the clarity of starting
from a position of oh God, what does that mean
actually allowed me to see things in the way that
many haven't, which is why I am so utterly horrified
when I hear people flippantly say that the AI bubble

(01:25):
will work out fine because it's just like the dot
com bubble. While there are similarities, I need to be
clear that I think the AI bubble is far, far worse,
and the calamity that follow us would be far more destructive.

Speaker 1 (01:36):
Let's review the dot com.

Speaker 3 (01:38):
Bubble actually had two elements, the stable, sensible tech companies
that actually made money, and then the likes of pets
dot com and webvan, both ideas that would eventually find
margin positive existence in the form of Dewey and Instacram.
I'd also add the telecommunications companies onto the side of
this as well, but technically they weren't making the websites.
They were just building me into them. What buried these

(01:58):
companies was their obsession with growth, with them a rush
to take them public. The idea of ordering pet food
or groceries online was one that would have made a
lot more sense if more people were connected to the
Internet or had faster connections in the year two thousand,
only about fifty two percent of Americans were online, and well,
both web van and pets dot Com were losing two
dollars for every dollar of revenue.

Speaker 1 (02:17):
I don't know.

Speaker 3 (02:18):
That shit didn't make any sense, and it wouldn't have
even if we had high speed internet. But I think
by the middle of the two thousands we only had
most people on at best four hundred kilobits per second,
so we're talking websites that took time to load. Anyway,
the economic sourceer didn't make sense. Now the AI bubble
differs in so far as that what we would have

(02:38):
once considered stable sensible tech companies are acting irrationally, having
doubled or in the case of Microsoft, tripled the amount
of hardware known as PP and E that they operate
in just a couple of years, with no signs of
slowing down. These companies are racking up entering into multi
decade long lease agreements, and it accumulated so much hardware
that the depreciation will erode any profitability for the short

(02:59):
term medium term future. For example, Microsoft went from having
around eighty eight billion dollars in PP and E that's property,
plants of equipment which is where the GPUs are, by
the way, in the beginning of twenty twenty three, to
a remarkable two hundred and thirty billion dollars in pp
and E as of its last quarter. And depreciation, by
the way, is not it's not a cash expense. They've

(03:21):
already bought the GPUs and the service and the like.
What it does, however, is sit there because they spread
it out over five to six years. I think it's
five and a half from Microsoft. They spread it out,
so it eats into that net income side. So instead
of they'd taken the immediate upfront hit, they spread it out.
So this means that each quarter from here until fucking eternity,

(03:41):
at this point, Microsoft is going to be taking billions
of dollars of appreciation charges. Now, while the dot com
bubble was wasteful, it didn't involve the largest and most
well respected tech firms in the world accruing hundreds of
billions of dollars of GPUs that are absolutely a year
or so after being installed. It also didn't involve billions
in operational expenses or acres of data centers. In fact,

(04:03):
there's really no comparison. Fiber doesn't compare at all the
scale of the fiber will get to it. But I
just want to be clear that fiber is also something
that you can use on many things. Fiber is something
that another company could come up and run with. Aigpus
are extremely limited in their outcomes. I've been over this before.
Not going to repeat myself. Perhaps I'll do it more

(04:26):
in depth episode on that in the future. But look,
in many ways, I fear the AI bubble is going
to be worse than the dot com bubble. It's going
to make it look small, and we are already seeing
some worrying signs. Now, let's start somewhere simple though.

Speaker 1 (04:39):
Layoffs.

Speaker 3 (04:41):
Fun fact, even during the dot com bubble, Microsoft barely
had any layoffs, with the company growing its headcount even
as the tech industry around it was consumed in flames.
The biggest round of firings I could find during the
nineteen ninety eight to two thousand and eight period was
between August twenty twenty four and January twenty twenty five,
when it can seventy six members of its ex Box
group as well as one hundred and fifty seven test

(05:02):
engineers whose jobs were offshore to India. That gives you
a grand total of two hundred and thirty three people.
For comparison, Microsoft laid off six thousand people in May
of last year, or three percent of its global workforce.
Now that's not to say that people at other companies
were equally fortunate. In two thousand and one, some Microsystems
called ninety percent of its workforce or thirty nine hundred jobs.

(05:25):
That was the first of many at that particular company.
In two thousand and one, the telecommunications sector cut and
I am not shitting you here three hundred and seventeen thousand,
seven hundred and seventy seven rolls, with the computer industry
second rank for that year, shedding one hundred and fifty
three thousand and nine hundred and fifty two positions. Similarly,
Amazon saw it stocked tumble in January two thousand when

(05:47):
it was discovered that it laid off one hundred and
fifty people, two percent of its workforce at the time,
and would lay off another thirteen hundred a year later,
or fifteen percent of its workforce. Now, that, by the way,
sounds like a lot. And also I think it's adorable.
Back when the stock market cared, when companies did layoffs,
they don't today. And Amazon indeed is a very different
company today, going from a fledgling digital book seller to

(06:09):
one of the largest retailers and cloud storage providers in
the world, and a very profitable one. And that Yet
this week Amazon laid off another fourteen thousand people, ten
percent of its corporate workforce, around three months after laying
off fourteen thousand more people in October twenty twenty five.

Speaker 1 (06:27):
Why well bids two things.

Speaker 3 (06:29):
First, it's the scourge of Jack welch, go and listen
to the shareholder supremacy from twenty twenty four if you
like that one, and the idea that laying people off
well at boosts profits, which Wall Street loves now. Secondly,
it's because Amazon is buying billions of dollars of GPUs,
both in Vidia and directly from TSMC for its trainium
custom chips. That is TSMC Taiwan Semiconductor Manufacturing Corporation they

(06:52):
build basically every chip, and Amazon they build them internally
using a company called Annapurna Labs. It's a whole thing
saying it doesn't really mean much. They're not as good
as vidious GPUs, but nevertheless they keep fucking that chicken.
And this is a massive burden on its earnings. These
chips have their costs spread out, like I mentioned as
a depreciation charge, dragging down the profits that Amazon can

(07:13):
report on its earnings in the process. Well, this isn't
the problem when you buy one or two or ten GPUs.
It becomes one when you have hundreds of thousands of
the fuckers. Amazon had sixteen point seven billion dollars of

(07:38):
depreciation charges and its last earnings. That's a great deal.
I think their net revenue is like twenty two to
twenty four billion dollars, not great. In similar terms, today's
layoffs are happening not because the companies are in trouble,
but because they want to boost their profits at a
time when AI services aren't providing a profit and I
don't think they ever will. Nevertheless, these layoffs are a sign

(08:00):
of something that these companies know that revenue growth isn't
keeping pace with their ruinous expenditures. The only jobs that
AI is taking are those that the hyperscaler cuts to
keep paying for its existence.

Speaker 1 (08:11):
In any case, people really need.

Speaker 3 (08:13):
To recognize that the dot com bubble wasn't some small
event that could be casually waved off, and other things
that happen tell the story of what might before anyone
left in or invested in the tech industry when it does.
In two thousand and one, VC funds raised sixty three
percent less than the previous year, and the amount of
money going to startups, not just technology companies, dropped by

(08:33):
slightly more. Then there's the stock marketing. If you held
stocks in the company like pets dot Com were at
its highest relatively modest four hundred million dollars, or Webvam
with a peak market cap of eight billion dollars, you
were completely fucking screwed. Those companies went to zero or
near enough. Even those who invested in established firms like
Microsoft and Sun faced their own haircuts, with Microsoft's share

(08:55):
price dropping from a high of one hundred and twenty
dollars to as little as forty dollars. Adjusted for the
two stock splits that happened in nineteen ninety nine and
two thousand and three, it would take around seventeen years
for Microsoft to reach its original dot com bubble highs.
The fact is, the dot com bubble fucked a lot
of people. The tech sector's share of employment wouldn't surpass

(09:16):
the levels of the bubble era until twenty fifteen. In practice,
this meant that newly graduated software engineers couldn't find much work,
and what work they could find offered stagnant wages that
didn't keep pace with inflation. That's the thing about the
dot com bubble. We like to think if it as
something that happened around the turn of the millennium, but
in practice it took until two thousand and four for
the contraction and the tech jobs market to finally bottom out.

(09:39):
Existing workers face threats not simply from economic related cutbacks
making the company do the same with the resources they
already have, but also from outsourcing, which grew exponentially in
popularity in the early two thousands. This incidentally, was around
the time that China entered the World Trade Organization, meaning
that in addition to cuts in the service related the
sector the economy, a lot of high tech manufacturing jobs

(10:02):
went out the door too. The point I'm making is
that the dot com bubble was bad, and that the
second order effects, the things that didn't get as many
headlines or as much pop culture weight, were really truly gruesome.
Now there's a great line from The Big Shot. I
always find myself returning to. It's when Ben rick At,
the retired finance guy who came back in from the
cold in order to help Brownfield Capital short the mortgage market,

(10:25):
castigates the two young founders for celebrating what would be
the trade of the century.

Speaker 2 (10:29):
If we're right, people lose homes, people lose jobs, people
whose retirement savings, people lose pensions.

Speaker 1 (10:35):
You know what I hate about fucking banking. It reduces
people to numbers. Here's a number.

Speaker 2 (10:38):
Every one percent, unemployment goes up, forty thousand people died.

Speaker 3 (10:41):
Did you know that It's so fucking easy to talk
about this period with statistical data, to talk about layoffs
and abstract terms like tens of thousands or hundreds of
thousands of jobs, or to say how the stock market contracted,
but things would work out okay, that everybody would be
fine in the future, and thus the fuck ups today
would be okay. I need to be clear that anybody

(11:02):
who traded into the dot com bubble got washed out,
and similarly, anybody who believed story after story about the
eternal growth and telecommunications or web startups lost almost everything,
if not everything they put in. Anybody who worked for Enron,
the people that didn't know about the illegal bullshit happening,
lost every cent of their stock based pension. Unemployment swelled

(11:22):
to a peak of six point three percent in June
two thousand and three, and the NASDAK lost nearly eight
percent of its value from its peak in the year
two thousand. Anyone saying that this is just like the
dot com bubble as some sort of defense of the reckless,
monstrous expenditures of the AI bubble is trying to find
rationalizations for irrational, reckless actions. These are likely privileged people
who define at the time were of found ways to

(11:44):
look back at a time of incredible suffering and believe
that because things are better today, that.

Speaker 1 (11:49):
All of it was worthwhile. It wasn't.

Speaker 3 (11:52):
I know that the fiber build out led to something,
and I'll get to that in the future episode, I promise.
But just because that happened doesn't make any this worthing.
All of the wasted money in that time could have
been spread out over a more thoughtful period. It wasn't,
and people suffered as a result. I'm going to talk
about this more next episode. Thank you for listening.

Speaker 1 (12:20):
Thank you for listening to Better Offline.

Speaker 3 (12:22):
The editor and composer of the Better Offline theme song
is Matasowski. You can check out more of his music
and audio projects at Mattasowski dot com, m A T
T O.

Speaker 2 (12:32):
S O w Ski dot com.

Speaker 3 (12:35):
You can email me at easy at better offline dot
com or visit better offline dot com to find more
podcast links and of course, my newsletter. I also really
recommend you go to chat dot Where's Youreed dot at
to visit the discord, and go to our slash Better.

Speaker 1 (12:48):
Offline to check out our reddit. Thank you so much
for listening. Better Offline is a production of cool Zone Media.
For more from cool Zone Media, visit our website cool
Zonemedia dot com.

Speaker 3 (13:00):
Check us out on the iHeartRadio app, Apple Podcasts, or
wherever you get your podcasts.
Advertise With Us

Host

Ed Zitron

Ed Zitron

Popular Podcasts

Dateline NBC

Dateline NBC

Current and classic episodes, featuring compelling true-crime mysteries, powerful documentaries and in-depth investigations. Follow now to get the latest episodes of Dateline NBC completely free, or subscribe to Dateline Premium for ad-free listening and exclusive bonus content: DatelinePremium.com

Betrayal Season 5

Betrayal Season 5

Saskia Inwood woke up one morning, knowing her life would never be the same. The night before, she learned the unimaginable – that the husband she knew in the light of day was a different person after dark. This season unpacks Saskia’s discovery of her husband’s secret life and her fight to bring him to justice. Along the way, we expose a crime that is just coming to light. This is also a story about the myth of the “perfect victim:” who gets believed, who gets doubted, and why. We follow Saskia as she works to reclaim her body, her voice, and her life. If you would like to reach out to the Betrayal Team, email us at betrayalpod@gmail.com. Follow us on Instagram @betrayalpod and @glasspodcasts. Please join our Substack for additional exclusive content, curated book recommendations, and community discussions. Sign up FREE by clicking this link Beyond Betrayal Substack. Join our community dedicated to truth, resilience, and healing. Your voice matters! Be a part of our Betrayal journey on Substack.

Music, radio and podcasts, all free. Listen online or download the iHeart App.

Connect

© 2026 iHeartMedia, Inc.